Federal Deductions Allocated To Effectively Connected Income Under Regulations Section 1.861-8

Deductions Allocated To Effectively Connected Income Under Regulations Section 1.861-8
2023 Schedule H (Form 1120-F)
SCHEDULE H
(Form 1120-F)
Department of the Treasury
Internal Revenue Service

Deductions Allocated to Effectively Connected
Income Under Regulations Section 1.861-8

2023

Attach to Form 1120-F.
Go to www.irs.gov/Form1120F for instructions and the latest information.

Employer identification number

Name of corporation

Part I

OMB No. 1545-0123

Home Office Deductible Expenses Definitely Related Solely to ECI or Non-ECI
Note: Enter all amounts on lines 1a through 13 in only U.S. dollars or in only functional currency. If U.S. dollars, check box
Otherwise, specify currency:

1a Total expenses on the books of the home office . . . . . . . . . .
b Check the applicable box below to indicate the accounting convention used to
compute the amount on line 1a:
U.S. GAAP
IFRS

2
3
4
5
6
7
8
9
10
11
12

13

1a

Home Country GAAP
Other (specify):

Adjustments for U.S. tax principles (attach statement – see instructions) . .
2
Total deductible expenses on the books of the home office. Combine lines 1a and 2 . . . . . .
Interest expense included on line 3 . . . . . . . . . . . . . .
4
Bad debt expense included on line 3 . . . . . . . . . . . . . .
5
Total of interest expense and bad debt expense. Add lines 4 and 5 . . . . . . . . . . . .
Remaining deductible expenses to be allocated and apportioned between ECI and non-ECI. Subtract line 6 from line 3
Deductible expenses definitely related solely to non-ECI from subsidiaries . .
8
Deductible expenses definitely related solely to other non-ECI booked in the home country
9
Deductible expenses definitely related solely to other non-ECI booked in other
countries (including the United States) . . . . . . . . . . . . .
10
Deductible expenses definitely related solely to ECI . . . . . . . . .
11
Total deductible expenses definitely related solely to ECI or non-ECI. Add lines 8 through 11 . . .

Part II

3

6
7

12

Home Office Deductible Expenses Allocated and Apportioned to ECI

Note: Enter the amounts on lines 15 through 20 in U.S. dollars.
Remaining deductible expenses on the books of the home office not definitely related solely to ECI or
non-ECI. Subtract line 12 from line 7 . . . . . . . . . . . . . . . . . . . . . .

14
15
16

Average exchange rate used to convert amounts to U.S. dollars (see instructions) . . . . . . .
Enter the amount from line 13. If line 13 is stated in functional currency, divide line 13 by line 14 . .
Remaining home office deductible expenses on line 15 allocated and apportioned under Regulations
section 1.861-8 to ECI (attach computation) . . . . . . . . . . . . . . . . . . .

17
18
19
20

Enter the amount from line 11. If line 11 is stated in functional currency, divide line 11 by line 14 .
Total home office deductible expenses allocated and apportioned to ECI. Add lines 16 and 17 . .
Total deductible expenses from other non-U.S. locations allocated and apportioned to ECI . . .
Total deductible expenses allocated and apportioned to ECI. Add lines 18 and 19 and enter
amount here and on Form 1120-F, Section II, line 26 . . . . . . . . . . . . . . .

Part III

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the
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13
14
15
16
17
18
19
20

Allocation and Apportionment Methods and Financial Records Used to Complete Parts I and II

Note: Enter the amounts in Part III, lines 21a, 21b, 22a, and 22b in U.S. dollars.
• If one or more methods used are different than in prior year, check box . . . . . . . . . . . . . . . . . . .
• If any amount on line 20 is recorded as an interbranch amount on books and records used to prepare Form 1120-F, Schedule
L, include the amount on Part IV, line 35 and check this box . . . . . . . . . . . . . . . . . . . . . .
21
Gross income ratio:
a Gross ECI
. . . . . . . . . . . . . . . . . . . . . .
21a
b Worldwide gross income . . . . . . . . . . . . . . . . . .
21b
c Divide line 21a by line 21b . . . . . . . . . . . . . . . . . . . . . . . . .
21c
%
22
Asset ratio:
a Average U.S. assets from Schedule I, line 5, column (d)
. . . . . . .
22a
b Worldwide assets (if applicable, from Schedule I, line 6b) . . . . . . .
22b
c Divide line 22a by line 22b . . . . . . . . . . . . . . . . . . . . . . . . .
22c
%
23
Number of personnel ratio:
a Personnel of U.S. trade or business . . . . . . . . . . . . . .
23a
b Worldwide personnel . . . . . . . . . . . . . . . . . . .
23b
c Divide line 23a by line 23b . . . . . . . . . . . . . . . . . . . . . . . . .
23c
%
24
Did the corporation use any ratio-based methods (other than those indicated on lines 21 through 23 above) in
Yes
No
Parts I and II? If “Yes,” attach statement (see instructions) . . . . . . . . . . . . . . . . . .
25
Did the corporation use any other methods (e.g., time-spent analysis or estimates) in Parts I and II? If “Yes,”
attach statement (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . .
For Paperwork Reduction Act Notice, see the Instructions for Form 1120-F.

Cat. No. 49679V

Schedule H (Form 1120-F) 2023

Page 2

Schedule H (Form 1120-F) 2023

Part III

Allocation and Apportionment Methods and Financial Records Used to Complete
Parts I and II (continued)
Note: Indicate whether the corporation used any of the following financial and other records in Parts I and II
to identify deductible expenses allocated and apportioned to ECI.
Yes No

26a
b
27
28

Published or other non-public audited financial statements . . . . . . . . . . . . . . . . . .
Non-audited financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home office management or other departmental cost accounting reports . . . . . . . . . . . . . .
Other (e.g., home country regulatory reports or written, contemporaneous functional analyses) (attach statement)

Part IV
29

Allocation and Apportionment of Expenses on Books and Records Used to Prepare Form 1120-F, Schedule L
Note: Enter all amounts in Part IV in U.S. dollars.

Total expenses per books and records used to prepare Form 1120-F,
Schedule L . . . . . . . . . . . . . . . . . . . . . .

29

30

Adjustments for U.S. tax principles (attach statement – see instructions) .

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30

31

Total deductible expenses. Combine lines 29 and 30

32a

Third-party interest expense included on line 31 .

b Interbranch interest expense included on line 31 .
33
34

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32a

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32b

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31

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36

33

Bad debt expense included on line 31 . . . . . . . . . . . . .
Other third-party deductible expenses not allocated or apportioned to ECI and
non-ECI under Regulations section 1.861-8 included on line 31 (attach
statement) . . . . . . . . . . . . . . . . . . . . . .

35

.

34

Interbranch expenses per books and records included on line 31 and not
included on line 32b (attach statement) . . . . . . . . . . . . .

35

36

Add lines 32a through 35

37

Deductible expenses on books and records allocated and apportioned to ECI or non-ECI under
Regulations section 1.861-8. Subtract line 36 from line 31 . . . . . . . . . . . . . . .

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Reconciliation of allocation and apportionment of deductible
expenses to ECI and non-ECI on books and records under
Regulations section 1.861-8 (from line 37)
38a

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(a)
ECI Amounts

Derivative transaction deductible expenses definitely related to ECI
or non-ECI under Regulations section 1.861-8 (from line 37) . .

38a

b Other deductible expenses definitely related to ECI or non-ECI
(from line 37)
. . . . . . . . . . . . . . . . .

38b

39

.

Total deductible expenses definitely related to ECI or non-ECI.
Add lines 38a and 38b . . . . . . . . . . . . . .

39

40

Other deductible expenses on books and records not definitely
related to ECI or non-ECI that are allocated and apportioned to
ECI and non-ECI (from line 37) . . . . . . . . . . . .

40

41

Total deductible expenses on books and records allocated and
apportioned to ECI and non-ECI. Add lines 39 and 40. Column (c)
must equal line 37 . . . . . . . . . . . . . . . .

37

(b)
Non-ECI Amounts

(c)
Total: Add columns
(a) and (b)

41
Note: Line 41, column (a) is the total of the deductions reported on Form 1120-F, Section II, lines 12, 13, 14, 16, 17, 19 through
24, and 27.
Schedule H (Form 1120-F) 2023